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Samsung Q1 Profit Surges 81% On Strong Smartphone, Tablet Sales

4/26/2012 11:02 PM ET

South Korean conglomerate Samsung Electronics Co. Ltd. (SSNLF.PK, SSNNF.PK, SMSN.L) reported late Thursday that profit for the first quarter surged 81 percent from last year, boosted by improved margins and strong sales of its Galaxy smartphones and the Galaxy Note mini tablet, offsetting weak performance at the memory chip business.

Samsung has reportedly narrowly beat Apple, Inc. (AAPL: Quote) in smartphone shipments in 2011 and the shipments are estimated by market analysts to exceeded Apple's iPhone sales by a large margin in the first quarter. Apple's shipped 35 million smartphone in the first quarter.

The Suwon, South Korea-based company reported a net profit of 5.05 trillion won or $4.45 billion for the first quarter, up 81.29 percent from 2.78 trillion won in the prior-year quarter, and 26.17 percent higher than 4.0 trillion won in the preceding fourth quarter.

Total sales for the quarter increased 22.40 percent to 45.27 trillion won from last year's 36.99 trillion won, but declined 4.3 percent from 47.30 trillion won in the prior quarter.

Total operating profit nearly doubled to 5.85 trillion won from 2.95 trillion won last year, with operating margin expanding 490 basis points to 12.9 percent from a year ago. Total operating profit also increased 10.46 percent from 5.30 trillion won in the fourth quarter.

Earlier in the month, Samsung had estimated first-quarter sales of about 45 trillion won, with an operating profit of about 5.80 trillion won.

Quarterly sales at Samsung's telecommunication division surged 70 percent to 23.22 trillion won, with 86 percent growth in mobiles sales. Handset shipment growth was substantially led by enhanced market leadership in high-end smartphones.

Amid a global patent war, Samsung is currently locked in patent infringement battles with Apple at courts in several countries in the European Union, the U.S. and Asia, involving smartphone and tablet patents for the past one year since April 2011. However, these have not affected their shipments.

Meanwhile, sales at the semiconductor division, normally the main source of income, declined 13 percent to 7.98 trillion won, with memory sales dropping 17 percent as stronger demand for NAND products used in smartphones and tablet PCs was more than offset by low DRAM prices and weak demand for them.

The recent bankruptcy of Japanese chipmaker Elpida Memory Inc. (ELPDF.PK) is likely to prompt Elipda's customers to turn to Samsung and another South Korean company Hynix in order to ensure smooth supply of chips for use in smartphones and laptops.

Display panel division's sales grew 31 percent to 8.54 trillion won, with LCD panel sales growing 17 percent, and TV panel shipment increasing about 20 percent. Shipment and sales growth continued due to the demand increase of OLED panels for smartphones. Samsung is now focused on expanding sales of value-added 3D/LED TV panels and sales of tablet panels.

Digital media and appliances division sales increased 2 percent, with visual devices sales edging up 0.3 percent.

Looking ahead, Samsung is expected to continue reporting strong earnings in 2012, with smartphone and tablet shipments likely to increase sharply, and a demand turnaround expected for DRAM, which had slumped last year.

The demand for LED TV and digital appliances are also expected to continue growing in the emerging markets and to improve in the developed market. LCD demand could also grow amid new set product launches and sales promotions related to Chinese Labor day, Olympics, and back-to-school period. Further, PC demand will grow slightly amid market recovery.

The company also is in the process of spinning-off its loss making liquid-crystal-display or LCD business as Samsung's wholly-owned subsidiary. The display market is undergoing rapid changes and organic light-emitting diode, or OLED panels will become the mainstream by fast replacing LCD panels.

Samsung shares are currently trading up 31,000 won or 2.31% in Friday's regular trading at 1,371,000 won on the Kospi on a volume of 0.16 million shares.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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